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Knight Therapeutics Reports Second Quarter 2018 Results

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MONTREAL, Aug. 09, 2018 (GLOBE NEWSWIRE) -- Knight Therapeutics Inc. (TSX:GUD) ("Knight"), a leading Canadian specialty pharmaceutical company, today reported financial results for its second quarter ended June 30, 2018.

Q2 2018 Highlights

Financials

  • Revenues were $2,238, a decrease of $242 or 10% versus prior period
  • Net income was $4,019, an increase of $3,560 or 776% over prior period
  • Cash flows from operations at $4,059, an increase of $688 or 20% over prior period
  • Cash, cash equivalents, and marketable securities of $806,746 as at June 30, 2018

Product

  • Received regulatory approval from Health Canada for Probuphine™ for the treatment of opioid drug dependence

Strategic Lending and Investments

  • Amended loan with 60P and disbursed US$647 out of a commitment to lend up to an additional US$2,100
  • Converted $500 Antibe debenture into 2,489,899 common shares and sold the shares for proceeds of $1,011
  • Received distributions of $1,856 from strategic fund investments

Key Subsequent Events

  • Received notice of reassessment from CRA
  • Received $3,188 from Profound representing full loan repayment and an early payment fee
  • Entered into a licensing agreement with TherapeuticsMD, Inc. ("TherapeuticsMD") to commercialize two products in Canada and Israel
  • Invested USD$20,000 in common shares of TherapeuticsMD at a price of US$5.10 per share
  • Accepted the resignation of Dr. Sarit Assouline and appointed Nancy Harrison to the Board of Directors

 "I am pleased with our progress at strengthening Knight's pipeline of innovative pharmaceuticals directed at touching the lives of patients. Our recent strategic investment and license agreement with TherapeuticsMD for two late stage, differentiated women's health products successfully leverages our strong balance sheet to help Knight secure innovative pharmaceutical rights," said Jonathan Ross Goodman, CEO of Knight Therapeutics Inc.

Select Financial Results

  Q2-18 Q2-17 Change     Change
    $1   %2 YTD-18 YTD-17   $1   %2
                 
Revenues 2,238   2,480   (242 ) 10 % 5,392 4,230   1,162   27 %
Gross margin 1,900   2,008   (108 ) 5 % 4,220 3,470   750   22 %
Operating expenses 3,401   4,246   845   20 % 6,774 7,493   719   10 %
Interest income 4,746   5,698   (952 ) 17 % 10,034 11,558   (1,524 ) 13 %
Share of net (loss) income of associate (151 ) 96   (247 ) N/A 352 415   (63 ) 15 %
Net income 4,019   459   3,560   776 % 10,928 6,506   4,422   68 %
Basic earnings per share 0.028   0.003   (0.025 ) 833 % 0.077 0.046   0.031   67 %

1      A positive variance represents a positive impact to net income and a negative variance represents a negative impact to net income
2      Percentage change is presented in absolute values

Revenue: Variance for the quarter and the six-month period was mainly attributable to the timing of sales for Impavido® and growth in Movantik® sales.

Gross margin: Change in gross margin was attributable to revenues variances and product mix.

Operating expenses: The decrease in Q2-18 was driven by a reduction in general and administrative expenses mainly related to lower stock-based compensation expense. For the six-month period, the decrease was driven by a reduction in general and administrative expenses mainly related to lower stock-based compensation expense, offset by commercial activities including the promotion of Movantik®.

Interest income: Interest income was driven by the sum of interest income and interest accretion. Interest income (excluding accretion) for the quarter was $4,746, an increase of 3% or $154 versus the prior quarter while interest income (excluding accretion) for the six-month period was $10,034, an increase of 7% or $660 versus the prior period. The increases are explained by an increase in the average cash, cash equivalents, and marketable securities balances and an increase in interest rates, offset by a lower average loan balance.

Net income: Net income for the quarter was driven by the above-mentioned items as well as a net gain on the revaluation of financial assets measured at fair value through profit or loss of $2,884. Similarly, net income for the six-month period was impacted by (i) a net gain on revaluation of financial assets measured at fair value through profit or loss of $3,425, (ii) other income of $1,388 due to the early repayment of fees on the Medimetriks loan, and (iii) a foreign exchange gain of $2,548 from the relative gains on certain U.S. dollar denominated financial assets as the Canadian dollar weakened.

Product Updates

On April 18, 2018, Probuphine™ was approved by Health Canada for the treatment of opioid dependence. Probuphine™ is a subdermal implant designed to deliver buprenorphine continuously for six months following a single treatment, promoting patient compliance and retention. Knight expects to launch Probuphine™ by the end of 2018.

On July 31, 2018, Knight entered into an exclusive licensing agreement for the commercial rights of TX-004HR and TX-001HR in Canada and Israel. TX-004HR is TherapeuticsMD's FDA-approved product, marketed as Imvexxy™ (estradiol vaginal inserts) in the U.S., for the treatment of moderate-to-severe dyspareunia (vaginal pain associated with sexual activity), a symptom of vulvar and vaginal atrophy (VVA), due to menopause. TX-001HR is TherapeuticsMD's investigational bio-identical hormone therapy combination of estradiol and progesterone in a single, oral softgel for the treatment of moderate-to-severe vasomotor symptoms due to menopause. Knight expects to submit both products to Health Canada for regulatory approval in 2019.

Strategic Lending Update 

On April 24, 2018, Knight amended its loan agreement with 60P and committed to lend an additional amount of up to US$2,100, at an interest rate of 15%, to support the regulatory approval and commercialization of tafenoquine. As consideration for the amendment, 60P committed to pay Knight an additional US$3,000 plus annual interest of 9% on April 23, 2023 ("60P Commitment").  Under the terms of the 60P Commitment, Knight has the right to convert the 60P Commitment into common shares of 60P at a pre-determined exercise price at any time prior to the maturity date. Furthermore, Knight obtained the rights to commercialize tafenoquine in Latin America.

Corporate Update

Dr. Sarit Assouline resigned from Knight's Board of Directors and Nancy Harrison was appointed. "We are grateful to Sarit for her time on our board and wish her every continued success," Mr. Goodman commented, "Nancy's experience as a life sciences specialist in the Canadian venture capital industry will be an asset to Knight and we are fortunate to have her join our board."

Nancy Harrison is former Co-founder and President of MSI Methylation Sciences, a private venture backed development company with a novel treatment of depression in a Phase II clinical trial. She is a former Partner and Senior Vice President of Ventures West Management Inc. Ms. Harrison spent 13 years with Ventures West leading its life sciences practice in Canada and the U.S. She is one of the most experienced life sciences investors in the Canadian venture capital industry and was instrumental in Ventures West's involvement in the sector and with companies such as Angiotech Pharmaceuticals Inc., AnorMed Inc., Salmedix Inc. and Oncogenix Pharmaceuticals Inc., Celator Pharmaceuticals Inc., and Caprion BioSciences. During her time with Ventures West, the firm grew from approximately $80 million to over $750 million. Ms. Harrison has an undergraduate degree in Engineering from Queen's University and an MBA from McGill University.

TherapeuticsMD Transaction

A presentation with additional information about the TherapeuticsMD transaction can be found on Knight's website at www.gudknight.com under Presentations and will remain available for 30 days. 

Conference Call Notice 

Knight will host a conference call and audio webcast to discuss its first quarter results today at 8:30 am ET. Knight cordially invites all interested parties to participate in this call.

Date: Thursday, August 9, 2018
Time: 8:30 a.m. EST
Telephone: Toll Free 1-877-855-7766 or International 248-847-2346                                  
Webcast: www.gudknight.com or https://tinyurl.com/y8wmkzkr  
This is a listen-only audio webcast. Media Player is required to listen to the broadcast.
Replay: An archived replay will be available for 30 days at www.gudknight.com

Currency

All dollar amounts are in thousands except for share and per share amounts. All currencies are Canadian unless otherwise specified.

About Knight Therapeutics Inc. 

Knight Therapeutics Inc., headquartered in Montreal, Canada, is a specialty pharmaceutical company focused on acquiring or in-licensing and commercializing innovative pharmaceutical products for the Canadian and select international markets. Knight Therapeutics Inc.'s shares trade on TSX under the symbol GUD. For more information about Knight Therapeutics Inc., please visit the company's web site at www.gudknight.com or www.sedar.com.

Forward-Looking Statement

This document contains forward-looking statements for Knight Therapeutics Inc. and its subsidiaries. These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Knight Therapeutics Inc. considers the assumptions on which these forward-looking statements are based to be reasonable at the time they were prepared but cautions the reader that these assumptions regarding future events, many of which are beyond the control of Knight Therapeutics Inc. and its subsidiaries, may ultimately prove to be incorrect. Factors and risks, which could cause actual results to differ materially from current expectations are discussed in Knight Therapeutics Inc.'s Annual Report and in Knight Therapeutics Inc.'s Annual Information Form for the year ended December 31, 2017. Knight Therapeutics Inc. disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information or future events, except as required by law.

CONTACT INFORMATION:

Knight Therapeutics Inc.
Samira Sakhia
President and Chief Financial Officer
T: 514-678-8930
F: 514-481-4116
info@gudknight.com
www.gudknight.com

INTERIM CONSOLIDATED BALANCE SHEETS
[In thousands of Canadian dollars]
[Unaudited]

As at June 30,2018 December 31, 2017
ASSETS    
Current    
Cash and cash equivalents 418,358 496,460
Marketable securities 318,388 232,573
Trade and other receivables 6,298 9,176
Inventories 966 1,224
Other current financial assets 25,438 58,848
Income taxes receivable 1,002 792
Total current assets 770,450 799,073
     
Marketable securities 70,000 36,000
Property and equipment 710 633
Intangible assets 15,506 12,576
Other financial assets 90,676 76,988
Investment in associate 78,990 75,983
Deferred income tax assets 2,801 4,730
Total assets 1,029,133 1,005,983
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current    
Accounts payable and accrued liabilities 4,100 5,025
Income taxes payable 8,911 7,599
Other balances payable 1,418 1,354
Deferred other income 268 282
Total current liabilities 14,697 14,260
     
Deferred other income 42 167
Other balances payable 1,085 348
Total liabilities 15,824 14,775
     
Shareholders' equity    
Share capital 761,595 761,490
Warrants 785 785
Contributed surplus 13,383 12,196
Accumulated other comprehensive income 18,575 20,907
Retained earnings 218,971 195,830
Total shareholders' equity 1,013,309 991,208
Total liabilities and shareholders' equity 1,029,133 1,005,983

INTERIM CONSOLIDATED STATEMENTS OF INCOME
[In thousands of Canadian dollars, except for share and per share amounts]
[Unaudited]

  Three months ended June 30, Six months ended June 30,
  2018    2017    2018    2017   
         
Revenues 2,238    2,480    5,392    4,230   
Cost of goods sold 338    472    1,172    760   
Gross margin 1,900    2,008    4,220    3,470   
         
Expenses        
Selling and marketing 892    1,050    1,681    1,413   
General and administrative 1,937    2,329    4,032    4,797   
Research and development 572    867    1,061    1,283   
  (1,501 ) (2,238 ) (2,554 ) (4,023 )
         
Depreciation of property and equipment 19    —    35    —   
Amortization of intangible assets 445    320    886    646   
Interest income (4,746 ) (5,698 ) (10,034 ) (11,558 )
Other income (37 ) (334 ) (1,388 ) (642 )
Net loss (gain) on financial assets —    1,056    —    (2,319 )
Net gain on financial assets measured at fair value through profit or loss (2,884
)
—    (3,425 )
—   
Share of net loss (income) of associate 151    (96 ) (352 ) (415 )
Foreign exchange loss (gain) 49    1,306    (2,548 ) 1,549   
Income before income taxes 5,502    1,208    14,272    8,716   
         
Income tax expense        
Current 911    628    1,552    1,108   
Deferred 572    121    1,792    1,102   
Net income for the period 4,019    459    10,928    6,506   
         
   
Basic earnings per share 0.028    0.003    0.077    0.046   
Diluted earnings per share 0.028    0.003    0.076    0.045   
         
Basic 142,819,960    142,760,357    142,816,677    142,740,562   
Diluted 143,270,324    143,557,171    143,247,377    143,177,337   



INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
[In thousands of Canadian dollars]
[Unaudited]

  Three months ended June 30, Six months ended June 30,
  2018    2017    2018    2017   
OPERATING ACTIVITIES        
Net income for the period 4,019    459    10,928    6,506   
Adjustments reconciling net income to operating cash flows:        
Deferred tax 572    121    1,792    1,102   
Share-based compensation expense 642    1,018    1,187    1,864   
Depreciation and amortization 464    320    921    646   
Accretion of interest —    (1,106 ) —    (2,184 )
Net (gain) loss on financial assets (2,884 ) 1,056    (3,425 ) (2,319 )
Foreign exchange loss (gain) 49    1,344    (2,548 ) 1,549   
Share of net loss (income) of associate 151    (96 ) (352 ) (415 )
Other income —    155    —       
Deferred other income (45 ) (84 ) (139 ) (231 )
  2,968    3,187    8,364    6,518   
Changes in non-cash working capital related to operations 1,091    (2,341 ) 2,559    (1,436 )
Dividends from associate —    2,525    —    2,525   
Cash inflow from operating activities 4,059    3,371    10,923    7,607   
         
INVESTING ACTIVITIES        
Purchase of marketable securities (232,762 ) (98,182 ) (283,517 ) (142,473 )
Purchase of intangible —        (3,000 )    
Purchase of property and equipment (44 )     (86 )    
Issuance of loans receivables (831 ) (1,807 ) (831 ) (1,807 )
Purchase of equities (310 ) (120 ) (710 ) (2,939 )
Investment in funds (9,925 ) (6,190 ) (14,202 ) (10,331 )
Proceeds on maturity of marketable securities 64,091    106,073    165,409    126,559   
Proceeds from repayments of loans receivable 1,594    2,266    35,034    30,324   
Proceeds from disposal of equities 1,015    2,806    1,015    3,515   
Proceeds from distribution of funds 5,756    1,222    6,099    3,376   
Cash (outflow) inflow from investing activities (171,416 ) 6,068    (94,789 ) 6,224   
         
FINANCING ACTIVITIES        
Proceeds from exercise of stock options —            345   
Proceeds from contributions to share purchase plan 42    50    91    93   
Cash inflow from financing activities 42    50    91    438   
         
(Decrease) Increase in cash during the period (167,315 ) 9,489    (83,775 ) 14,269   
Cash and cash equivalents, beginning of the period 583,408    519,522    496,460    514,942   
Net foreign exchange difference 2,265    (1,132 ) 5,673    (1,332 )
Cash and cash equivalents, end of the period 418,358    527,879    418,358    527,879   
         
Cash and cash equivalents 418,358   527,879      
Short-term marketable securities 318,388   233,282      
Long-term marketable securities 70,000        
  806,746   761,161      

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